Recent cycle of PC

upgrades could begin to slow">
Meanwhile, the industry has continued to benefit from strong sales of consumer items such as digital cameras, which enjoyed a phenomenal 85 percent increase in sales last year, Semico reported, slowing to a robust 31 percent this year. Although the PC market is largely saturated, notebook sales grew 9.1 percent in 2003 and are expected to grow 31 percent this year, Semico found. Cell phones grew 16 percent last year and should increase by 15 percent in 2004.
The problem, however, is that the recent cycle of PC upgrades could begin to slow. "We continue to see the PC and cell phone upgrade cycle in 2004, but what were concerned about is seeing that uptick abate in 2005," Feldhan said.

The firms final concern is the general macroeconomic climate. In January 2003, the Federal Reserve Board reported that the U.S. GDP increased by 3.1 percent. In 2004, Feldhan said, Semico predicts that it will increase by 4.2 percent.

In 2005, however, the U.S. economy could face its third straight year of a half-trillion-dollar deficit. The firm predicts that the Fed will raise interest rates, which would have a stifling effect on consumer spending. "We do feel that theres a black cloud out there concerning a macroeconomic slowdown in 2005," he said.
And that could continue to mean a discrepancy between the perceived health of the semiconductor industry and the loss of technology jobs in the United States. Bob Bailey, president and chief executive of embedded processor chip firm PMC-Sierra Inc. in Santa Clara, Calif., said his firm has outsourced low-level design jobs overseas, treating them as a buffer or an emergency repair crew. The majority of his design staff remains in North America, he said.
"The myth is that outsourcing is a low-cost kind of thing," he said, citing India and China as examples. "The reality is that you can suddenly ramp up 150 to 200 engineers extremely quickly, and ramp them down again extremely quickly."
"The economy is very strong; the question is how you create more jobs," said George Scalise, the president of the SIA, speaking at the summit here. "The issue is real, it has to be resolved, but it wont be easy."
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